By James Hyerczyk
Commodities Trading Advisor
After Friday’s dismal jobs data ignited a sell-off on Wall Street, investors will have no time to dwell on the aftermath. This week they face the Federal Open Market Committee’s release of minutes from last month’s meeting, as well as consumer and inflation data. In addition, the focus will be on the earnings reports from Alcoa (AA) and J.P. Morgan (JPM) to name two important ones.
Alcoa reports first late Monday but the consensus is mixed as to whether this report will have enough interest to set the tone for the earnings season. Investors are looking for the aluminum giant to report a decline in earnings. A 30% drop in aluminum prices is to blame for the weak outlook. Analysts are looking for Alcoa’s earnings to slump to 6 cents per share with revenue failing to $5.84 billion. This will be a poor showing when compared to last year’s 28 cents and $6.59 billion.
JPMorgan Chase & Co. (JPM) will also report earnings this week. Investors will be fervent to know how big of a hit the bank’s earnings took on the fouled up hedge position it reported several weeks ago. At first glance, the initial estimated loss at the bank was $2 billion but current talk on the street suggests it could be as much as $8 billion.
International events could also drive equity prices this week. China reports gross domestic product data. Traders are pricing in negative news, but this report could produce a positive surprise. Economists expect China to report year-on-year GDP growth of 7.6 percent, compared to the first quarter figure of 8.1 percent.
ECB President Mario Draghi’s testimony before Europe’s parliament on Monday could be a market mover. Of the many investor concerns, the focus remains on Italian and Spanish borrowing costs and how the Euro Region will pay for the recently proposed banking system bailout deal.
In my opinion, the most important event for the week will be the release of the FOMC minutes. Last month the U.S. Federal Reserve extended Operation Twist by $267 billion through 2012. This report can move the markets because it often gives investors insight into future policymaking. Stocks dropped sharply on June 20 after the Fed disappointed investors by extending Operation Twist. Investors will be looking for any signs from the Fed that more aggressive action may be necessary especially in the wake of the poor jobs data on Friday.